The Role of Law and Legal Institutions in Asian Economic Development: The Case of Taiwan Patterns of Change in the Legal System and Socio-Economy

This paper is part of a collaborative research project entitled The Role of Law and Legal Institutions in Asian Economic Development (1960-95) which was sponsored by the Asian Development Bank. The study included six Asian economies: People's Republic of China (PRC), India, Japan, Republic of Korea, Malaysia and Taiwan,China. Oxford University Press is publishing the comparative report. This essay addresses a major question: Did law matter for economic development in Taiwan,China from 1960 to 1995? Following a methodology common to all six country studies, the authors divided the 35 years into major economic policy periods: export-led growth characterized by export promotion from 1960 to 1972, export-led growth characterized by import substitution from 1973 to 1985, and liberalization and globalization from 1985 to 1995. The changes in economic policy reflected significant changes in domestic politics and the world's political economy. The authors analyzed legal change separately for each period. They found that during each period the major changes in the laws supported the dominant economic policy. Thus in the period from 1985 on, the laws changed in significant qualitative ways, shifting to formal institutions and rights-based laws and away from discretionary procedural powers in the bureaucracy. Growing entitlements made the interaction of law and economic growth more complex. While the causal relation between legal and economic change was bidirectional, the economic tended to lead the legal. The authors concluded that law in Taiwan,China was relevant to economic growth, and increasingly so. JEL codes: O16, O19, O53, O57, K10, K11, K12, K2, K42, P52 HIID Development Discussion Paper no. 663 THE ROLE OF LAW AND LEGAL INSTITUTIONS IN ASIAN ECONOMIC DEVELOPMENT: THE CASE OF TAIWAN PATTERNS OF CHANGE IN THE LEGAL SYSTEM AND SOCIO-ECONOMY Lawrence S. Liu (Soochow University Graduate School of Law) Tain-Jy Chen (National Taiwan University, Chunghua Institute for Economic Research)